Significant Fee increases for Bankruptcy and Winding-Up Petitions on the way – Lexology

New fees are soon to be introduced by The Insolvency Service in respect of the insolvency deposit required to commence a creditors bankruptcy petition and winding-up petition which will make it harder for many businesses to collect their debts.

Each bankruptcy or winding-up order administered by the Official Receiver is partly funded through a deposit paid by the creditor when filing the petition. The deposit contributes towards the Official Receivers administration costs, which include liaising with the bankrupt or insolvent company and investigating their assets. The Official Receivers remaining costs are recovered through fees charged against assets realised during the bankruptcy or winding-up proceedings. If there are sufficient assets to recover all the fees and costs, then the insolvency deposit is returned to the creditor that initiated the bankruptcy or winding-up proceedings.

The Insolvency Service has recently confirmed that the insolvency deposit for the purpose of obtaining a bankruptcy or winding-up order will be increasing in all cases where a petition is filed at court on or after 1 November 2022. Although, there will be no change to the adjudicator petition deposit where the individual debtor applies for their own bankruptcy.

Changes being made to deposits

The changes will mean the overall fee to issue the above petitions (including the court fee) will be:

Bankruptcy Petitions - increase from 1,292 to 1,802

Winding-Up Petitions - increase from 1,902 to 2,902

The Insolvency Service has clarified that these increases will be implemented as a direct result of the number of insolvency cases falling to a historically low level in recent years and the remaining cases having insufficient asset values to recover the Official Receivers administration costs. It is noted that the fees have remained the same since April 2016 and the current low level of cases is still a result of the temporary measures introduced regarding the presentation of winding-up petitions following the COVID-19 pandemic. These temporary measures were removed and the insolvency regime returned to its pre-pandemic position with immediate effect from 1 April 2022.

It is anticipated that the fee increases will enable the Insolvency Service to continue to administer and investigate insolvencies effectively, maximising outcomes for creditors whilst mitigating the risk of cost recovery being passed on to the taxpayer.

These fee increases may deter creditors from presenting bankruptcy and/or winding-up petitions. We are therefore encouraging creditors to take prompt action whether by way of issuing a bankruptcy or winding-up petition without further delay to take advantage of the current fee levels prior to the 1 November 2022 implementation date. For any creditors with outstanding debts or problematic debtors, there is benefit in acting prior to the 1 November 2022 date.

We can assist creditors and provide cost-effective advice following the fee increase announcement. We offer a fixed fee service in respect of the presentation of bankruptcy and winding-up petitions which may reduce the impact of the insolvency deposit fee increases.

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Significant Fee increases for Bankruptcy and Winding-Up Petitions on the way - Lexology